Tuesday, 6 February 2018

EP votes on the geo-blocking regulation

After a political agreement on the proposed regulation prohibiting unjustified geo-blocking had been reached in November last year, there was a general expectation that new rules will formally be adopted in early 2018. The first step was made today by the European Parliament, which approved the proposal in a plenary vote.

The new rules define three specific situations in which a different treatment of customers (consumers and businesses as end-users) from different Member States is considered unjustified and is therefore prohibited. These include:
  • The sale of goods without a request to deliver them to a territory in which the trader does not operate (the customer orders a product and collects it at the trader's premises or organises delivery himself);
  • The provision of (some) electronically supplied services, such as cloud, data warehousing, website hosting;
  • The provision of services which are received by the customer in the country where the trader operates (e.g. hotel accommodation, car rental).
In the abovementioned circumstances customers across the EU should be able not only to access online interfaces directed to customers from other Member States and compare a wider range of offers, but also finalise transactions on conditions offered in those territories.

Contentious issues

An element which caused controversy from the very beginning related to the interface of the geo-blocking proposal with the provisions of private international law. In particular, concerns were raised that traders who decided to serve a consumer from another Member State, in compliance with new rules, would be considered to "direct their activities" to the country of that consumer, within the meaning of Article 6 of  Rome I and Article 17 of Brussels I regulation (recast). The text adopted today includes additional wording which aims to mitigate this risk (recital 13).

An even more controversial topic referred to the material scope of the proposal, especially the treatment of electronically supplied services providing access to copyright-protected content. Should, for example, Belgian customers be allowed to buy their Netflix or Spotify subscription for the price offered in the Polish market? This raised concerns not only about price arbitrage, but, more importantly, about the impact of such a solution on the territorial licensing schemes. And these points of criticism were even stronger than in the previous discussions on cross-border portability.

At this point it is worth recalling that audio-visual services were kept out of the scope of the Commission's proposal from the very beginning, even if, at the internal level, this choice was not entirely unanimous. The decision was explained by the need to establish consistency between the scope of the new measure and Article 20 of the Services Directive. Besides, the issue of digitally distributed AV content was to be addressed by the copyright package. 

Limitations of the scope of the act adopted today do not stop here, however. No dramatic change of the status quo is also expected with respect to services providing access to other copyright-protected content such as music (e.g. streaming services), literary works (e.g. e-books) or video games. Services of this kind have technically been kept within the remit of the act (thus falling under the provisions on automatic re-routing or payment methods), but have been excluded from its core access provision (Article 4). 

Concluding thought

The compromise reached in November and, consequently, the final draft must come as a relief to the creative industry. What is left for those hoping for a border-free access to copyrighted works - at least to the extent allowed by existing licensing arrangements - is a "review clause" requiring the Commission to assess, after two years, if the scope of the act should be extended. Until this happens, one can be advised to rather focus on the impact of the geo-blocking regulation - as it currently stands - on the e-commerce market (e.g. Rome&Brussels I litigation, developments in package delivery) as well as the on-going copyright reform, particularly the proposal on online transmissions.

The proposed geo-blocking regulation is now awaiting a vote in the Council and is expected to come into force later this year.

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